Equity Research Report Ways2Capital 14 March 2017
Added: (Wed Mar 15 2017)
Pressbox (Press Release) -
NIFTY FIFTY : - Indian Benchmark Index Nifty on Friday closed at 8898 after making low of 8860, the index made a high of 8907 after opening at 8884. From last 2 week Nifty Index fell almost 1.05% from high of 8993. The index Nifty opened in a Positive note on Monday trading session up by 18 points and 0.20 per cent at 8915. Benchmark Index Nifty opened at 8915 a closed at 8963 after making a high of 8968 & traded in a narrow range of 132 points from 8860 to 8992 from last 9 trading sessions. Market is expected to come out of this range as UP election results will be announced on 11th March 2017, A convincing BJP win in all the states including UP may bring BJP for a near majority in this election; we may see more effective implementation of vital economic reforms including GST and land & labour bills. But, election is also an uncertain event, especially for a big & complex state like UP, where the present Government enjoys a significant popularity and market may also remember some shocking result for BJP in the recent big elections in Bihar & Delhi. The market would remain choppy and wait for US FED rate hike decisions. overall, This week will be the last week of consolidation. The Market is consolidating for almost 2 weeks and now it is ready to see a big movement on either side in next 2 trading sessions and UP Poll results would be a trigger for this big move. Traders should hedge their positions. The Significance Support for Nifty is 8901-8880 and Resistance is 9007-9077.
BANK NIFTY : -On last Week trading session Bank Nifty closed at 20496 after making a low of 20423, the Index made a high 20580 after opening at 20573. The Index was down by 1.83%, the index 3 week high was at 21042. The Banking Shares Index opened in a Positive note on Monday trading session up by 53 points or 0.25 per cent at 20548, The Bank Nifty traded in a range of 195 points on Monday trading session, the index made a high of 20727 and low 20532 and closed at 20663, 168 points Up its previous day. No major movement has been seen in any of the Banking stocks present in the Index. Bank Nifty Index is trading in a narrow range of 620 points from 20423 to 21042 from last 2 week. The Significance Levels for Bank Nifty is 20548-20290 is Down side and 21455-21865 is Up side.
NSE - WEEKLY NEWS LETTERS
✍ TOP NEWS OF THE WEEK
Indian economy to grow 7.1% in this fiscal; Dec quarter GDP numbers surprising: Fitch - Global rating agency Fitch today said Indian economy will grow by 7.1 per cent in the current fiscal before stepping up to 7.7 per cent in the next two financial years. The US-based agency, however, termed the 7 per cent GDP growth for the October-December quarter as "surprising", a tad lower than 7.4 per cent in the previous quarter. This number looks somewhat surprising, as real activity data released since demonetisation pointed to weak consumption and services activity because these transactions are cash-intensive. By contrast, official data suggest that private consumption was strong in the fourth quarter of 2016 (though services output growth moderated quite substantially)," Fitch said. Fitch expects Indian GDP to grow by 7.1 per cent for 2016-17, before picking up to 7.7 per cent in both 2017-18 and 2018-19.
India beats China in export growth of locally made retail, lifestyle products - India is outpacing China in export growth of locally made retail and lifestyle products, according to Damco, the world’s seventh largest freight forwarder. An analysis of sourcing data by the transport and logistics arm of Danish shipping conglomerate AP Moller-Maersk Group shows that amid tepid global economic conditions, Indian exports of these products grew at a compound annual growth rate of 10% between 2013 and 2016, while China registered only 5%, though it had a much bigger base. “Contrary to the bleakness of global trade, the future looks promising for India,” Damco chief executive officer Klaus Rud Sejling said in an interview with ET. “The country is clearly well-poised to shape global trade, as global retailers are constantly looking for suppliers that are nimble enough to be able to adjust with troughs and peaks in the demand cycle, not only from an output point of view, but also when it comes to developing entirely new products and customising existing lines.
Revised tax treaty with Singapore takes effect - India's revised tax treaty with Singapore, aimed at checking round-tripping of funds, has come into force. While most clauses of the amended treaty signed on December 30 took effect from February 27, the principal clause allowing levy of capital gains tax on investments routed through Singapore will come into force from April 1. The Third Protocol amending the existing Avoidance of Double Taxation Agreement between Singapore and the Republic of India entered into force on February 27, 2017," a statement issued by Ministry of Finance of Singapore said. It further stated that "the 3rd protocol signed on December 30, 2016 entered into force on February 27, 2017 and its provisions shall take effect from February 27, 2017 except for Articles 2, 3 and 4 which shall take effect from 1 April 2017." India had in May last year signed a revised tax treaty with Mauritius, triggering a change in the Double Taxation Avoidance Agreement with Singapore.
Modest recovery ahead as firms unwilling to hire more despite improved PMIs: HSBC - Even as both service and manufacturing PMIs have posted better numbers than previous months, that firms are reluctant to increase hiring points to a modest 'U' shaped recovery with the Reserve Bank likely to hold on to rates in the near future, says a report by HSBC Research. Both manufacturing and services PMIs are now in positive territory following a few months of demonetisation-led disruptions. Higher output, new orders and order-to inventory ratios point towards improvements ahead, said HSBC. Yet, companies are reluctant to increase hiring, and future activity expectations have fallen. Manufacturing PMIs at 50.7 in February compared to 50.4 in January and services PMI at 50.8 in February compared to 49.9 in January are in the positive territory, led by stronger private sector output and new orders. Services activity rose after three months of contraction. Manufacturing had already started to rise last month, and picked up some more pace. However, both manufacturing and services have some way to go before reaching pre-demonetisation levels. Moreover, a slight improvement in the manufacturing order-to-inventory ratio to 1.12 in February from 1.10 in January suggests that activity may improve in future months. Interestingly, manufacturers are seeing higher buoyancy in new orders than service providers, with much of it coming from external demand, said the report.
CPSE stake sale: Ministries wary of foreign investors - The government’s strategic sale plan could face headwinds with some administrative ministries insisting on stringent conditions on foreign investment for the sale of state-run companies under their watch. In some cases, the administrative ministries insist that strategic equity stakes must not be sold to foreign investors, including institutional investors, said two government officials aware of the deliberations. In others, they want a cooling-off period of a few years after a strategic sale before allowing foreign investment. Companies identified for strategic sales include Pawan Hans Ltd., BEML, Dredging Corporation of India Ltd. and Bharat Pumps & Compressors Ltd. In some strategic sectors, the conditions also include that no foreign company can be brought in as stakeholder for the next five years,” said one official who did not wish to be identified. Not all companies put up for strategic sale have similar stringent conditions.
Likely rise in Feb inflation may push RBI to act: Report - Consumer price inflation is likely to rise in February for the first time since demonetisation and this could prompt the Reserve Bank of India to hike rates much sooner than most expect, says a report. According to a report by Capital Economics, consumer price inflation dropped in January to 3.2 per cent from 3.4 per cent in December, but is likely to rise in February. We think that forthcoming data will show that the CPI rate edged up in February to 3.5 per cent," the report said, adding that "we expect February's WPI data to show that the headline rate rose again last month to 6 per cent". According to Capital Economics, since inflation is likely to accelerate towards the upper band of RBI's target range this year, this may nudge the Reserve Bank to hike rates sooner than expected. The RBI has signalled the end of its loosening cycle, but we remain comfortable going one step further in our view that the central bank will have to reverse course and begin hiking rates over the next 12-18 months as its long-term inflation target comes under pressure," it said.
India's current account deficit to touch $ 30 billion in 2018' - India's current account deficit is expected to increase by $ 10 billion to $ 30 billion in the 2017-18 fiscal due to higher oil and gold imports, credit rating agency ICRA said on Thursday. However, the pressure related to the financing of a larger current account deficit would abate with the resumption of Non-Resident Indian deposits in 2018. The ICRA expects a rise in the prices and import volumes of crude oil and gold to enlarge the Indian current account deficit to around $ 30 billion in 2018 from around $ 20 billion in 2017. While merchandise exports may rise by 5-6 per cent in 2018, partly led by the higher value of commodity-intensive exports, global trends do not augur well for a significant improvement in the services trade surplus and remittances in 2018," Aditi Nayar, principal economist at the ICRA said.
✍ TOP ECONOMY NEWS
The government is all set to change the base year of the Index of Industrial Production and the Wholesale Price Index to 2011-12, by April-end. The change in base year in the two macroeconomic indicators has been scheduled to ensure that all macroeconomic data indicators follow the same base year, targeted at better mapping of economic activities.
The traders association in the country, Confederation of All India Traders, has appealed to postpone the roll out of Goods and Services Tax to September 1. since small businesses are yet to buckle up for the implementation and its aftermath. As per CAIT, there are nearly 70% small businesses, which are not yet prepared for GST. Traders from small businesses need to understand the provisions and details of GST.
The Nikkei India Services Purchasing Managers' Index , which records service sector output on a monthly basis, was at 50.3 in February, which is nominally higher than 48.7 registered in January. Meanwhile, the Nikkei India Composite PMI Output Index, which records both manufacturing and service sectors, rose from 49.4 in January to 50.7 in February.
Prime Minister Narendra Modi said while speaking to the media in the national capital before the concluding part of the Budget session, he wanted to see a breakthrough in GST. GST Bill is still waiting for the final approval as the major opponents are still not happy with the final draft of the Bill. Though the GST Council already approved the final drafts of the Central and Integrated GST Bills which will soon be put up in public domain.
In what can be seen as an improvement in productivity and demand in the world’s second largest economy, the factory-gate prices surged unexpectedly to Multi-year highs in China even as the consumer price growth slowed down. The consumer price index increased by 0.8% in February on a Y-o-Y basis. The CPI showed an increase of almost 2.5% in January, according to the National Bureau of Statistics.
Insurance regulator IRDAI has cleared different levels of licences to a host of new players in the insurance industry in Non-life and reinsurance spaces in its recently held board meeting.
Even as the government and several economists are debating the real impact of demonetisation, a research report by Moody’s say that the process of withdrawing the high denomination notes by Narendra Modi government may yield positive results in the long run.
The Authority of Advance Ruling recently held that the entire revenue of a company registered in Singapore from supplying goods or rendering services in India is taxable in India.
Finance Minister Arun Jaitley will chair a high-level meeting with Reserve Bank officials tomorrow to address the issue of Non-Performing Assets in the banking sector. The meeting, which will also be attended by Financial Services Secretary Anjuly Chib Duggal, will discuss ways of resolution of stressed assets urgently, sources said.
Even if the private sector is not in a hurry to grab the vast opportunities of investment in infra projects, the government has abundant sources of funds to carry on with their development agenda in the sector, as stated by a top Cabinet Minister during the Economic Times India Infra Summit.
Crisil, in its recent report, hints that revenue will grow by 8-9% in fiscal 2018 for corporate India. The growth of 8-9% in fiscal 2018 if delivered will be a five year high for the corporates and this growth according to Crisil is driven by firm commodity prices, stable macros and lower interest rates. While keeping the growth expectation at 7.4% for fiscal 2018, Crisil expects a mild growth in the economy. The economic growth could be due to pent-up consumption demand after demonetisation.
✍ TOP CORPORATE NEWS -
SPML Infra Limited received new orders worth Rs. 250 crore for power Transmission & Distribution projects in West Bengal and Haryana.
Following USFDA warning, pharma major, Wockhardt Pharma on Wednesday early trading hour, declined upto 3.58 per cent and later improved significantly facing heavy buying. USFDA slapped a warning note to Wockhardt for its Morton Grove facility in the USA. The USFDA note also said that the pharma major did not pay adequate heed to its earlier notes.
The board of directors of Hero MotoCorp have declared an interim dividend of Rs. 55 per equity share of face value Rs. 2 each, for the financial year 2016-17, March 18, 2017 as the record date for payment of the interim dividend.
The board of directors of Cadila Healthcare have declared an interim dividend of Rs 3.20 per equity share of face value Rs 1, covering the financial year 2016-17. The board of directors has set March 17,2017 as the record date for payment of interim dividend.
Cyient Limited through its wholly owned US subsidiary, Cyient Inc., has acquired 100% stake in CERTON Software Inc. The acquisition of CERTON will strengthen Cyient’s business, by adding Unique Model-based systems, engineering tools and test automation capabilities that are used to design, develop, simulate, validate and verify safety-critical embedded systems, software and electronic hardware.
Lupin Limited announced that the company has launched generic Paxil CR Extended Release Tablets USP, 12.5 mg, 25 mg and 37.5 mg. The pharma major has received an approval from the USFDA earlier.
Crompton Greaves is gaining in trade at morning hours of Tuesday’s session as it has signed a share purchase agreement with Alfanar Electric Systems Co., Saudi Arabia for the sale and acquisition of the company’s B2B Automation business comprising of ZIV Aplicacionesy Tecnologia, S.L. (Spain) , its subsidiaries along with related automation businesses in India, UK, Ireland & France for an enterprise value of Euro 120 million, subject to customary conditions From Alfanar.
South Indian Bank is soaring on bourses on a lacklustre day and is up by more than 2% in the early hours of the trade. The Reserve Bank of India, via a notification on Monday stated that the central bank has withdrawn the restrictions placed on the purchase of shares of South Indian Bank by foreign portfolio investors.
Mahindra & Mahindra Limited total vehicle production fell by 1.2% in February Y-o-Y to 44,401 units. For the month of Feb, M&M produced 11 compact cars and 354 super compact cars. The passenger vehicles sales for M&M Limited fell by 13% Y-o-Y to 20,605 units. The commercial vehicles sales stood at 16,383 units, up by 18% in February.
Punjab National Bank plans to sell 7% of its stake in PNB Housing Finance. PNB currently holds 39% stake in the housing finance company, and various private equity investors have shown interest in buying stakes in the mortgage arm, owing to its portfolio and low Non-Performing Assets.
The Reserve Bank of India has opposed a pact between the Tata Group and NTT Docomo aimed at resolving a two-year-old dispute between the two over the enforcement of a $ 1.17-billion arbitral award by an international court to the Japanese company.
Kotak Mahindra Bank's promoter Uday Kotak on Wednesday sold a 1.5 per cent stake in lender to two Canadian pension funds for an estimated Rs. 2,255 crore through open market transactions.
Tata Motors Limited on Tuesday said it is in talks with the world's largest auto maker Volkswagen for a possible partnership. The company is exploring various opportunities, including partnership in its new advanced modular platform development, possibilities of a joint venture or a contract manufacturing with the German auto major, in its bid to scale up.
Tata Motors-owned Jaguar Land Rover today reported its best-ever retail sales for February at 40,978 vehicles, up 9.3 per cent from the same month last year.
State-run power giant NTPC Limited announced commissioning of 45 MW solar capacity at Bhadla in Rajasthan taking the total installed capacity of the project to 160 MW. "The 45 MW of Bhadla solar power project of NTPC in Rajasthan has been commissioned today. With this, the installed capacity of Bhadla solar power project has become 160 MW and that of NTPC's solar power projects has become 520 MW," a senior official said.
State-run Power Finance Corporation today said that it has sanctioned financial assistance of Rs. 2,703 crore for West Bengal's first super critical thermal power project in Murshidabad district.
India's largest car maker Maruti Suzuki is gearing up to introduce four new products next fiscal. The company, which has been bringing about two new products each year in the past couple of years, is accelerating the introduction with an eye to strengthen its hold in the market.
Jain Irrigation has bagged an order worth Rs. 189 crore for development of micro irrigation systems network in Rajasthan. "Jain Irrigation receives order worth Rs. 1,890 million for development of micro irrigation systems network," the company said in a filing to the stock exchanges.
Coal India Limited will pay the government, its largest shareholder, over Rs 15,000 crore through dividend, distribution tax and proceeds of a share buyback this year, a drop of 13% from the amount paid in 2015-16. The company's board declared a dividend of Rs 18.75 per share on Monday, entitling the government to get Rs 9,208 crore for its 79.11% shareholding. The government will also receive Rs 2,369 crore as dividend distribution tax and about Rs 3,600 crore from shares sold back to the company in October last year.
Steel Authority of India Bhilai Steel Plant crossed a significant milestone on Tuesday with the lighting up of the stoves of the plant's new furnace which is slated to take its post modernisation hot metal capacity to 7.5 million tonne.
Dr Reddy's Laboratories said it has received 13 observations from the US health regulator for its formulation manufacturing facility at Duwada, Visakhapatnam. "The audit of company's formulation manufacturing facility at Duwada, Visakhapatnam, by the US FDA, has been completed on March 8, 2017. The company have been issued a Form 483 with 13 observations, which the company is addressing," Dr Reddy's Laboratories said in a BSE filing.
✍ TOP BANKING AND FINANCIAL NEWS OF THE WEEK
ESAF Microfinance, the only company from Kerala to receive the small finance bank license, has issued Commercial Papers worth Rs.330 crore. The papers are rated A1 by CARE ratings. The subscribers to the CP are major private sector banks and NBFCs.
State-owned Punjab National Bank will put on sale four bad assets worth Rs. 295 crore in a move to shed Non-Performing Assets from its books. Last week, PNB Managing Director Usha Ananthasubramanian said the bank has identified assets worth Rs. 1,800 crore that will be sold by month-end to recover bad loans.
Banks' cash transaction fees are suddenly in the news. The immediately trigger for this appears to be an announcement by HDFC Bank that it would henceforth charge Rs. 150 plus taxes for each cash withdrawal or deposit after four deposits each month.Here, it seems that HDFC Bank missed a trick because the normal stratagem that banks employ is to introduce charges by stealth. ICICI Bank and Axis Bank have been quietly charging similar fees for some time now. Under the garb of supporting the government's efforts to promote cashless, these banks have decided to relieve their customers of some cash.
Indian banks and companies have filed claims worth Rs. 4,089 crore in the past three months under the Insolvency and Bankruptcy Code, which seeks to ensure time-bound settlement of insolvency. The code that came into effect in December has given the lenders a new tool to counter the problem of rising Non-Performing Assets, which soared to Rs. 6.97 lakh crore in the quarter to December.
Additions to India’s bloated bad-loans inventory are unlikely to cease soon, with about a dozen lenders now approaching debt-recovery courts to recover a part of their estimated credit exposure of Rs. 17,300 crore to Mumbai-based Top worth. Lenders led by the State Bank of India and Punjab National Bank are filing cases in the Mumbai debt recovery tribunal –– either individually or as a consortium against Top worth Urja & Metals, Phoenix Impex and Poscho Steels for cumulative defaults of about Rs. 3,200 crore, two people familiar with the matter Said. Bank of Baroda has already filed a case against Top worth Pipes & Tubes in Mumbai DRT to recover Rs. 356 crore.
Some Indian banks remain at risk of skipping coupon payments on capital instruments over the next couple of years; despite measures by the Reserve Bank of India says Fitch Ratings. Mid-sized state banks are the most at risk of breaching capital triggers. Distributable reserves at small- to mid-sized state banks were down by one third in 9M17 compared with financial year 2015.
Mid-sized private lender IndusInd Bank Limited said it is in talks with multiple entities for business expansion, including the widely speculated merger of Bharat Financial Inclusion.
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